Australia has given Abu Dhabi's air carrier Etihad Airways the go signal to expand to 10 per cent its stake control in Virgin Australia.

In a statement on Thursday, the Middle Eastern airliner said the Foreign Investment Review Board (FIRB) has allowed the company to increase its holdings in Australia's no. 2 from 5 per cent to a maximum of 10 per cent. The request for increased controllership has been lodged with the FIRB for a couple of weeks now, a testament to pronouncements in June that it would obtain necessary regulatory authorization to plans of increasing its hold in Virgin Australia.

In June, Etihad Airways raised its stake in the Australian air carrier to 4.99 per cent.

"At a point in time, we would like to take it to a minimum of 10 percent, if we get the necessary approvals," James Hogan, Etihad Airways CEO, had said last month. However, he clearly pointed out that his airline company was not interested on a Virgin Australia takeover and noted Abu Dhabi's investment would not go beyond the threshold of 19.9 per cent.

Shares in Virgin Australia immediately responded positively to the news, jumping 1.25 cents to 39.25 cents this afternoon.

Etihad Airways' entry into Virgin Australia resulted from the latter's decision to separate its international and domestic operations, effectively signaling the desire to accept entry of foreign investment.

Operating 24 flights a week to Australia, the two airlines work on code-sharing flights, joint marketing schemes and joint earn-and-burn on respective frequent-flyer programs.

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